James Hyerczyk
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Natural Gas

Natural gas futures are edging higher early Friday after posting a mostly sideways trade the previous session, following the release of a neutral government weekly storage report. Additionally, production and liquefied natural gas (LNG) continued to underpin prices.

At 06:35 GMT, July natural gas futures are trading $3.031, up $0.006 or +0.20%.

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Technically, prices continue to consolidate just below a multi-month high at $3.045 and appear to be poised to breakout to the upside, provided there is a bullish catalyst. A trade through $2.928 will change the main trend to down.

Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 71 billion cubic feet (Bcf) for the week ended May 7. That was generally in line with a consensus of forecasts.

The EIA said the data, however, included an adjustment to the week’s total to account for a reclassification of some gas stocks from working gas to base gas. Working gas is the volume of gas available in the market.

Total stocks now stand at 2.029 trillion cubic feet (Tcf), down 378 Bcf from a year ago and 72 (Bcf) below the five-year average, the government said.

Ahead of the EIA weekly storage report, estimates submitted by Bloomberg showed a median 73 Bcf injection. Predictions ranged from an injection of 68 Bcf up to 92 Bcf. A Reuters poll of 16 analysts showed a range of estimates from an injection of 68 Bcf to 82 Bcf, with a median build of 77 Bcf.

The average forecast of 13 analysts participating in a Wall Street Journal survey landed at 73 Bcf. Estimates ranged from increases of 68 Bcf to 79 Bcf.


Short-Term Weather Outlook

According to NatGasWeather for May 14 to May 20, “Weather systems/cool shots will linger across the Plains, Midwest, and Northeast for one last day with highs of 50s to 60s and lows of 30s and 40s, then warming into the upper 60s to lower 80s for lighter demand. Cooling has also pushed into Texas, the South, and the Southeast along with scattered showers and thunderstorms that will continue through the weekend with highs of 70s to low 80s for light demand, then warming next week into the 80s to lower 90s. The West will be warm to very warm with highs of 60s to 100s, hottest Southwest. Overall, moderate demand for one last day, then dropping to low for the foreseeable future.”

Daily Forecast

Without a catalyst, buyers, who are looking for an upside breakout, may just throw in the towel and wait for a reset at a more favorable price level.

The overall tone is bullish, but we may not actually see a huge breakout to the upside until summer heat is put into the forecast.

Bespoke Weather Services said that while cool weather early in May across swaths of the Midwest and Northeast boosted natural gas use at times, weather-driven demand is expected to fade in the second half of the month as comfortable temperatures spread across northern regions. Larger storage increases are expected to follow.

Furthermore, looking ahead to next week, early injection estimates are hovering around 70 Bcf, though analysts expect injections to rise closer to the triple-digit level by the end of May.

For a look at all of today’s economic events, check out our economic calendar.
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